Financial System Riskier, Next Bailout Will Be Costlier, S&P Says

The financial system poses an even greater risk to taxpayers than before the crisis, according to analysts at Standard & Poor’s. The next rescue could be about a trillion dollars costlier, the credit rating agency warned.

S&P put policymakers on notice, saying there’s “at least a one-in-three” chance that the U.S. government may lose its coveted AAA credit rating. Various risks could lead the agency to downgrade the Treasury’s credit worthiness, including policymakers’ penchant for rescuing bankers and traders from their failures.

“The potential for further extraordinary official assistance to large players in the U.S. financial sector poses a negative risk to the government’s credit rating,” S&P said in its Monday report.

But, the agency’s analysts warned, “we believe the risks from the U.S. financial sector are higher than we considered them to be before 2008.”

Because of the increased risk, S&P forecasts the potential initial cost to taxpayers of the next crisis cleanup to approach 34 percent of the nation’s annual economic output, or gross domestic product. In 2007, the agency’s analysts estimated it could cost 26 percent of GDP.

Last year, U.S. output neared $14.7 trillion, according to the Commerce Department. By S&P’s estimate, that means taxpayers could be hit with $5 trillion in costs in the event of another financial collapse.

Experts said that while the cost estimate seems unusually high, there’s little dispute that when the next crisis hits, it will not be anticipated — and it will likely hurt the economy more than the last financial crisis.

The words “government takeover” were originally injected into the discourse by Frank Luntz in the early stages of the health care reform process and have been repeated in the pejorative sense by Republicans across the board.

Despite the fact that thousands of Americans die every month from a lack of affordable health insurance, the Republicans have argued that the government isn’t allowed to “takeover” the industry. It goes without saying that the president wasn’t proposing any such thing and, in fact, publicly denounced single-payer health insurance, but okay. The Republicans truly believe the health care reform bill is socialism and a total takeover of the industry. It’s not.

Likewise, the Republicans and tea party people have been screeching about the bailouts. They insist that the banks and financial institutions (and GM) should have been allowed to fail, rather than receiving emergency loans from the government in order to, at the time, prevent the American economy from being dragged down along with these institutions had they not been hoisted with an infusion of cash.

The dominant centerpiece to all of this outrage has been the Republican idea that the states and the free market should be left alone to deal with problems and crises on its own without “socialist” — or even “communist” depending on which AM radio station you listen to — interference from big government and our America-hating president. No government takeovers. Freedom! Liberty! And no stupid volcano thingees also.

Americans dying from a lack of health insurance? Too bad. No government takeover. The economy about to sink into a second Great Depression? Too bad. No government takeover. The Earth growing warmer due to the burning of fossil fuels? Too bad. No government takeover.

The cliché tells us that you can’t judge a book by its cover. Agreed. But sometimes you can tell a lot about a book by the blurbs on its cover (and just inside the cover).

Such is the case with Simon Johnson and James Kwak’s 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown, this month’s HuffPost Book Club pick. You know a book is onto something when, even in these politically polarized times, and dealing with a hot button issue like financial reform, it features side-by-side praise from both Jim Bunning and Alan Grayson. Yes, that Jim Bunning, who says that the book “makes it clear why ending ‘too big to fail’ and reforming the institutions that perpetuate it… are essential for our nation’s future economic prosperity and, more fundamentally, our democratic system.” Clearly, the need to reform our out-of-control financial system is not a right vs. left issue. (Full disclosure: I also did a blurb for the book).

The book is also incredibly timely, with the Senate gearing up for a floor debate on Sen. Dodd’s financial reform bill when it returns from Easter break. While offering an in-depth explanation of the factors that led to the financial crisis — a crisis Johnson and Kwak prove beyond any doubt is not over — 13 Bankers has the immediacy and of-the-moment feel of a blog post, the sense that this is happening now.

You gotta see this! If this doesn’t convince you that the Timothy Geithner knew about the securities shenanigans that were going on at Lehman, than I don’t know what will.

Keep in mind, that Geithner ran Lehman through 3 “stress tests” prior to bankruptcy; all of which Lehman failed, and yet, nothing was done. Anton R. Valukas–the examiner who wrote the 2,200 page investigative-report which was released on Thursday– has provided plenty of information detailing Lehman’s “materially misleading” accounting and “actionable balance sheet manipulation.”

In other words, they cooked the books.

Eves Smith at Naked Capitalism sums up what was going on like this:

“Quite a few observers… have been stunned and frustrated at the refusal to investigate what was almost certain accounting fraud at Lehman. ….The unraveling isn’t merely implicating Fuld (Lehman CEO) and his recent succession of CFOs, or its accounting firm, Ernst & Young, as might be expected. It also emerges that the NY Fed, and thus Timothy Geithner, were at a minimum massively derelict in the performance of their duties, and may well be culpable in aiding and abetting Lehman in accounting fraud and Sarbox violations….

We need to demand an immediate release of the e-mails, phone records, and meeting notes from the NY Fed and key Lehman principals regarding the NY Fed’s review of Lehman’s solvency. If, as things appear now, Lehman was allowed by the Fed’s inaction to remain in business, when the Fed should have insisted on a wind-down ….. at a minimum, the NY Fed helped perpetuate a fraud on investors and counterparties.

Crash Pilot Appears To Have Written Anti-IRS, Anti-Corporate Screed

Joe Stack, the Texas man who this morning, say law enforcement officials, flew a plane into an Austin building that houses a local IRS office, appears to be the author of a lengthy online screed, lashing out at the IRS, the federal government, and big corporations, and referring to his coming death.

The rant reflects many of the same populist, anti-government, anti-tax, and anti-corporate themes that have surfaced around the country over the last year. It is entitled, and concludes: “Well, Mr. Big Brother IRS man, let’s try something different; take my pound of flesh and sleep well.”

Stack’s Austin home was on fire this morning, at roughly the same time that he’s said to have crashed his plane, according to the Austin-American Statesman.

Stack died in the crash, officials have confirmed. The paper adds that an IRS revenue collection agent who worked on the building’s second floor is missing, according to another revenue agent who worked in the building. The building, known as the Echelon 1 Building, houses about 190 IRS employees, according to a statement from the agency.

The FAA has said the crash appears to be a “criminal act” and that the FBI would take the lead in investigating the incident. But federal officials have said they don’t consider the crash to be a terrorist attack, according to the New York Times.

In the message, posted at the site EmbeddedArt.com, Stack, a software engineer, writes that the idea of “No Taxation Without Representation” is espoused as a principle, but that in reality, “anyone who really stands up for that principal is promptly labeled a ‘crackpot’, traitor and worse.”

He also appears to denounce the Wall Street firms that helped caused the financial crisis — and even the lack of progress on health-care reform, criticizing Washington politicians for failing to fix “the joke we call the American medical system,” and for doing the bidding of the drug and insurance companies:

Why is it that a handful of thugs and plunderers can commit unthinkable atrocities (and in the case of the GM executives, for scores of years) and when it’s time for their gravy train to crash under the weight of their gluttony and overwhelming stupidity, the force of the full federal government has no difficulty coming to their aid within days if not hours? Yet at the same time, the joke we call the American medical system, including the drug and insurance companies, are murdering tens of thousands of people a year and stealing from the corpses and victims they cripple, and this country’s leaders don’t see this as important as bailing out a few of their vile, rich cronies. Yet, the political “representatives” (thieves, liars, and self-serving scumbags is far more accurate) have endless time to sit around for year after year and debate the state of the “terrible health care problem”. It’s clear they see no crisis as long as the dead people don’t get in the way of their corporate profits rolling in.

Referring to the bailouts of airlines after 9/11, Stack writes: “the Government came to the aid of the airlines with billions of our tax dollars … as usual they left me to rot and die while they bailed out their rich, incompetent cronies WITH MY MONEY!”

He adds: “There has never been a politician cast a vote on any matter with the likes of me or my interests in mind. Nor, for that matter, are they the least bit interested in me or anything I have to say.”

He concludes with a shot at the capitalist system:

The communist creed: From each according to his ability, to each according to his need.The capitalist creed: From each according to his gullibility, to each according to his greed.

Well, there just isn’t much good news out here on the fringes of the blogosphere lately, so I find myself looking at a Fox News video. This because they are supposed to be interviewing Dennis Kucinich, one of the last sane politicians on the planet. Along with Rick Sanitarium, a corporate spokesman, who should seriously seek psychiatric counseling.

Just sayin, I’ve already heard about the party crashers from my friend over on the coast. Anyways, further into the video, Dennis Kucinich gets a few words in edgewise. I tell ya what…If this country was a Democracy instead of a Corporation, this man could be president and if pigs had wings we would have plenty of compost for our victory gardens.

Hat tip to GEF (globalevildoerfighter) for the correct spelling of Santorum

This from George:

Hello y’all

Senior moments now greatly out number the bad hair days, so I can be certain of nothing. But if memory serves me right (and I am not implying that it always does) I recently ran into this couple down in Yachatz. They were sipping Bushmilk and weeping. Seems like these stylish synchophants got their feelings hurt. How would you feel?

“Not on the guest list ” and “uninvited” to an event you knew was just the place you should be? Egos bludgeoned down into scuff marks left by hi-$ footwear, they drove West. I offered sympathy. What they needed to do I suggested was stage an extravagance all their own. maybe a big time civil war party at some fancy place. They agreed. But, since we didn’t know where the game was being played, they told me they were going to reserve nice rooms in both Corvallis and Eugene so they’d be sure to see the Ducks & Beavers on TV.

If you’d like to attend this party, call the best hotels in the appropriate citys and ask for their room #. Your name will be on the list, for real, George.

This Is It! World Premiere of ‘Capitalism: A Love Story’ Tonight …a message from Michael Moore

Sunday, September 6th, 2009

Friends,

Well, this is it!

Tonight, at the Venice Film Festival, I will premiere my new movie, “Capitalism: A Love Story.” After 16 months of production, I am proud to present this work of mine to you. It is unlike anything you’ll see on the silver screen this year. (more…)

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